Uber insurance coverage while transporting passengers and while on-duty but not transporting passengers

Today is part three of my analysis of the new “Uber bill” that was introduced on January 15, 2015 as HB 4032. In part one, I reviewed the bill itself. And in yesterday’s part two post, I discussed whether HB 4032’s proposals overcome my big concerns as an auto insurance attorney about the “commercial use” exclusion – a potential landmine that currently leaves Uber drivers likely uninsured if they’re involved in a serious car accident. The commercial use exclusion has been a long-standing problem in this state.

In summary, I believe HB 4032’s auto insurance coverage requirements for when an Uber driver is transporting passengers or riders is so extensive that, even if the Uber driver has a “commercial use” exclusion in her personal auto insurance policy, it likely won’t preclude insurance coverage after a motor vehicle accident.

To recap from yesterday, HB 4032 requires the following coverage when a driver for an app-based ride-sharing service is transporting passengers or riders:

The company must “maintain[]” a “primary insurance policy” covering the driver and providing $1 million in liability coverage (considerably more coverage that would likely be provided in a driver’s personal auto insurance policy) as well as No Fault and property protection insurance.

Coverage while on-duty but not transporting passengers

Here’s why I’m concerned a “commercial use” exclusion in an Uber driver’s personal auto insurance policy could jeopardize coverage in the event of a motor vehicle crash while the Uber driver is on duty, but not transporting passengers – despite HB 4302’s proposed requirements:

HB 4032 does not require that the app-based ride-sharing service maintain the coverage for the driver.

HB 4032 does not require that such company-maintained coverage be the “primary” coverage, i.e., the first to pay out in the event of a crash.

I admit, this is my best guess as to how this will play out in the future. But I have these concerns in large part because of how HB 4032 is written as of today, and in particular, the bill’s non-committal position on insurance coverage. This, to me, is the key question – but left open-ended by the new legislation.

Here is how it reads:

“The requirement of this subdivision may be satisfied by a combination of insurance policies maintained by a transportation network company or a transportation network company driver.”

That’s pretty non-specific. It is a far cry from – and stands in stark contrast to – HB 4032’s other requirement that the company “maintain[]” a “primary insurance policy covering each … driver …” when the driver is transporting passengers or riders.

Without requiring the service or company to maintain auto insurance coverage and without making that insurance coverage primary, HB 4032 is allowing for the possibility of insurance coverage being denied and/or needlessly complicated in the event of a motor vehicle accident.

And here’s where it could get ugly

If the Uber driver’s personal auto insurance policy has a “commercial use” exclusion, which it almost certainly will, then her claim for No Fault insurance benefits could be denied.

If the Uber driver was at-fault in causing a car accident, then his liability protection for bodily injury and property damage would be void. And that means anyone that would have claimed No Fault insurance benefits through the driver would now have to turn to other sources if they qualify under Michigan’s No Fault order of priority on No Fault, or apply for PIP benefits through the Michigan Assigned Claims Plan (MACP).

HB 4302 can still be improved

HB 4302 is not yet law in the state of Michigan. As HB 4032 progresses through the House and the Senate, I hope lawmakers will read this blog post and seriously consider how “commercial use” exclusions in auto insurance policies will impact people in Uber-driven vehicles, especially in the examples I provided above.

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